Ains 21 Part B

Front 1

Agent

Back 1

acts on behalf of the insurer

Front 2

broker

Back 2

acts on behalf of the insured

Front 3

solicitor

Back 3

producer with no binding authority

Front 4

principal

Back 4

the party that authorizes the agent to act on that party's behalf.

i.e. the insurer

Front 5

5 legal duties of the agent to the principal

Back 5

*be loyal to the principal

*obey the principal's lawful instructions

*exercise a reasonable degree of care

*account promptly for any of the principal's money

*keep the principal informed of all relevant facts

Front 6

2 legal duties of the princpal to the agent

Back 6

*pay the agent for services performed

*idemnify the agent for any losses suffered without the agent's fault but arising out of the agent's actions on behalf of the principal

Front 7

actual authority

Back 7

authority conferred by the principal on an agent under an agency contract.

includes express and implied authority

Front 8

express authority

Back 8

specifically granted to the agent

Front 9

implied authority

Back 9

conferred on an agent by custom, usage, or a principal's conduct indicating intention to confer such authority

Front 10

binding authority

Back 10

a form of express authority where the agent can issue temporary coverage until a formal policy is issued

Front 11

apparent authority

Back 11

a third party's reasonable belief that an agent has authority to act on the principal's behalf

Front 12

independent agency

Back 12

a business operated for the benefit of its owner that sells insurance, usually as a representative of several unrelated insurers

Front 13

broker

Back 13

shop among insurers to find the best coverage and value for their clients.

don't have binding authority

Front 14

What is an agency's most valuable asset?

Back 14

the expiration list

Front 15

expiration list

Back 15

record of an agency's present policyholders and the dates their policies expire

Front 16

independent agency network

Back 16

group of agencies that contractually link to share services, resources, and insurers

to gain advantages normally available only to large regional and national brokers

Front 17

MGA

Back 17

Managing General Agent:

authorized by the primary insurer to manage all or part of their insurance activities, usually in a specific geographic area

Front 18

who owns expiration lists in an exclusive agency marketing system?

Back 18

the insurer

Front 19

Can an exclusive agent or direct writer place business with another insurer?

Back 19

Only if their insurer doesn't offer the product or service needed

Front 20

internet portals

Back 20

offer multiple insurers and products on one website

Front 21

difference between call center and direct response distribution channels

Back 21

call centers are for existing business,

direct response is for new prospects

Front 22

affinity marketing

Back 22

target groups based on profession, interests, hobbies, or attitudes

Front 23

trade associations

Back 23

serve their members through education, lobbying, research, and advertising to create a favorable image

Front 24

why are financial institutions appealing as strategic partners for insurers? 4 reasons

Back 24

*strong customer base

*predisposition to product cross-selling

*strength at processing transactions

*efficient use of technology for database mining geared to specific products and services

Front 25

3 issues to consider with a mixed marketing system

Back 25

*maintain consistent customer communications

*provide consistent customer experience

*match each type of insurance with an appropriate distribution system and channel

Front 26

3 distribution systems

Back 26

*independent agency and brokerage

*exclusive agency

*direct writer

Front 27

4 types of independent agencies and brokerages

Back 27

*independent agents and brokers

*national and regional brokers

*independent agency network

*MGA (Managing General Agent)

Front 28

6 distribution channels

Back 28

*internet

*call centers

*direct response

*group marketing

*trade associations

*financial institutions

Front 29

6 prospecting methods

Back 29

*referrals from present clients

*referrals from strategic partners

*advertising in multimedia and direct mail

*interactive websites

*telephone solicitations

*cold canvas

Front 30

how to conduct risk management review for individuals or families

Back 30

interview or questionnaire that assists in identifying the prospect's loss exposures

Front 31

why is a risk management review more complicated for businesses than individuals?

Back 31

each business has unique components

Front 32

loss run

Back 32

history of claims that have occurred over a specific period, valued as of a specific date

Front 33

8 functions of insurance producers

Back 33

*prospecting

*risk management review

*sales

*policy issuance

*premium collection

*customer service

*claim handling

*consulting

Front 34

agency bill process

Back 34

producer bills the insured and sends net premium after commissions to the insurer

Front 35

three methods of transmitting premiums to insurer

Back 35

*item basis

*statement basis

*account current basis

Front 36

item basis

Back 36

net premium after commission is forwarded to the insurer when the producer collects it

Front 37

statement basis

Back 37

producer is obligated to pay the premiums indicated on a statement from the insurer, or else prove the statement was in error

Front 38

account current basis

Back 38

pay the insurer when the premium is due, even if the policyholders have not paid the producer.

Front 39

direct bill

Back 39

insurer collects premiums and sends commission to the producer

Front 40

why are distribution systems difficult to change?

Back 40

contracts and ownership of expiration lists

Front 41

5 parts of an insurer's profile to consider when selecting distribution systems and channels

Back 41

*insurer strategies and goals

*insurer strength

*existing and target markets

*geographic location

*degree of control required over producers' results and methods

Front 42

which distribution system is most effective in sparsely populated areas?

Back 42

independent agent or direct response (no agent). because exclusive agents are too expensive for places with not enough business

Front 43

3 aspects of marketing that are regulated

Back 43

*licensing

*compensation

*unfair trade practices

Front 44

why do some states require claims representatives to have a license?

Back 44

so those making claim decisions are aware of prohibited practices and have a minimum technical understanding

Front 45

2 forms of compensation for producers

Back 45

*sales commission

*contingent commissions

Front 46

contingent commissions

Back 46

based on profitability and/or growth in the agency's book of business placed with that insurer

Front 47

why are contingent commissions scrutinized?

Back 47

because brokers will be tempted to lead business to the insurer with the highest payout rather than the insurer that is the best fit for the customer

Front 48

3 unfair trade practices in marketing

Back 48

*misrepresentation and false advertising

*tie in sales

*rebating

Front 49

tie in sales

Back 49

when a producer requires that the purchase of insurance be tied to some other sale or financial arrangement

Front 50

this organization is often called the "Big I"

Back 50

IIABA (independent insurance agents and brokers of america)

Front 51

3 purposes of underwriting

Back 51

*guard against adverse selection

*ensure adequate policyholders surplus

*enforce underwriting guidelines

Front 52

adverse selection

Back 52

the tendency for people with the greatest probability for loss to be the ones most likely to purchase insurance

Front 53

capacity

Back 53

the amount of business an insurer is able to write, usually based on a comparison of the insurer's written premiums to its policyholders' surplus

Front 54

line underwriter

Back 54

focuses on evaluating new and renewal submissions and execute the underwriting policy

Front 55

staff underwriter

Back 55

focuses on the risk selection process.

assists management with making and implementing underwriting policy

Front 56

6 steps of the underwriting process

Back 56

1. evaluate the submission

2. develop underwriting alternatives

3. select an underwriting alternative

4. determine an appropriate premium

5. implement the underwriting decision

6. monitor the underwriting decision

Front 57

hazard

Back 57

a condition that increases the frequency or severity of a loss

Front 58

4 types of hazards

Back 58

*physical

*moral: intentional or exaggerated loss

*morale: carelessness

*legal

Front 59

information efficiency

Back 59

the amount of information needed to underwrite an account based on the number of hazards it presents

Front 60

insurance advisory organization

Back 60

independent organization that works with and on behalf of insurers that subscribe to its services, which include developing prospective loss costs and standard policy forms

Front 61

treaty reinsurance

Back 61

reinsures a primary insurer for an entire class or portfolio of loss exposures

Front 62

facultative reinsurance

Back 62

primary insurer submits individual loss exposures for reinsurance and the reinsurer can accept or reject

Front 63

8 sources of underwriting information

Back 63

*producers

*applications

*inspection reports

*government records

*financial rating services

*loss data

*field marketing personnel

*claim files

Front 64

expert systems aka knowledge-based systems

Back 64

software that supplements the underwriting decision making process

Front 65

4 major modifications underwriters make to a submission

Back 65

*require risk control measures

*change insurance rates, rating plan, or policy limit

*amend policy terms and conditions

*use facultative reinsurance

Front 66

3 types of rating plans

Back 66

*experience rating

*schedule rating

*retrospective rating

Front 67

experience rating system

Back 67

adjusts premium for the upcoming policy period based on insured's loss experience in the current period

Front 68

schedule rating system

Back 68

awards debits and credits based on certain categories so that final premium reflects those factors

Front 69

retrospective rating system

Back 69

adjusts premium for the current policy period based on insured's loss experience

Front 70

agency reinsurance

Back 70

an alternative to facultative reinsurance where the producer divides insurance among several insurers

Front 71

rate

Back 71

price of insurance per exposure unit

Front 72

premium calculation

Back 72

rate * number of exposure units

Front 73

5 duties of underwriting management

Back 73

*participate in insurer company management

*arrange reinsurance

*delegating underwriting authority

*develop and enforce underwriting guidelines

*monitor underwriting results

Front 74

who analyzes loss data and develops rates?

Back 74

actuaries or insurance advisory organizations

Front 75

loss costs

Back 75

the portion of the rate the covers projected claim payments and LAE

Front 76

contingencies

Back 76

a provision for losses that could not be anticipated in the loss data

Front 77

class rating

Back 77

rates are the same for all individuals in a class based on average probability of loss.

premiums may be higher depending on number of exposure units

Front 78

individual rating

Back 78

points system reflects the unique characteristics of an account

Front 79

judgment rating

Back 79

a type of individual rating to insure an exposure for which there is no established premium-determining system and the underwriter uses their own judgement

Front 80

2 goals of the claim function

Back 80

*keep the insurer's promise

*support the insurer's profit goal

Front 81

independent adjuster

Back 81

independent claim rep who handles claims for insurers for a fee

Front 82

2 reasons to hire an independent adjuster

Back 82

*no staff in that area

*not enough staff in case of catastrophe

Front 83

TPA

Back 83

Third Party Administrator:

provides administrative services associated with risk financing and insurance to self insured insurers

Front 84

draft

Back 84

payment made by a producer that reduces the time an insured waits for payment

Front 85

public adjusters

Back 85

hired by the insured to represent the insured

Front 86

3 measures of claim performance quality

Back 86

*identified best practices

*claim audits

*customer satisfaction

Front 87

7 steps in the claims process

Back 87

1. acknowledge and assign the claim

2. identify the policy and set reserves

3. contact the insured

4. investigate the claim

5. document the claim

6. determine the cause of loss, liability, and loss amount

7. conclude the claim

Front 88

nonwaiver agreement

Back 88

under question of coverage,

agreement signed by both parties indicating that neither party waives rights during investigation

Front 89

reservation of rights letter

Back 89

under question of coverage,

insurer's letter to insured specifying coverage issues and that the insurer is handling the claim but may later deny coverage

Front 90

subrogation

Back 90

after an insurer pays a loss, it can recover the amount paid from a third party who caused the loss or is otherwise legally liable

Front 91

diary systems

Back 91

allows the representative to work on a claim one day and set a date for review

Front 92

5 types of claims reports

Back 92

*internal reports for parties within the insurance organization who have an interest in the loss

*preliminary reports inform the insurer about initial activity on the claim

*status reports report progress

*summarized reports are detailed narratives that follow an established format

*external reports inform producers and others with an interest in the claim

Front 93

5 alternatives to litigation in dispute resolution

Back 93

*mediation

*arbitration

*appraisal

*mini-trial

*summary jury trial

Front 94

mediation

Back 94

neutral outside party develops a mutually agreeable settlement

Front 95

arbitration

Back 95

neutral outside party decides the settlement

Front 96

appraisal

Back 96

resolves disputes over amount owed

Front 97

mini-trial

Back 97

abbreviated trial before a panel or adviser who poses questions and offers opinions

Front 98

summary jury trial

Back 98

abbreviated trial presenting evidence and witnesses to a panel of mock jurors

Front 99

insurable interest

Back 99

interest in the subject of a policy that is not unduly remote and that would cause financial loss if the property were damaged

Front 100

3 common valuation methods

Back 100

*ACV

*replacement cost

*agreed value

Front 101

which valuation method is used for personal property?

Back 101

actual cash value

Front 102

which valuation method is used for real property?

Back 102

replacement cost

Front 103

salvage rights

Back 103

the insurer's rights to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss or constructive total loss

Front 104

constructive total loss

Back 104

when it costs more to repair than it would to pay off the value and collect salvage

Front 105

3 ways liability claims are different from property claims

Back 105

*claimant is a third party and may act hostile or unfriendly

*may involve bodily injury, making it more difficult to determine amount of loss

*must determine whether the insured is legally responsible

Front 106

compensatory damages

Back 106

reimburse a victim for actual harm

Front 107

special damages

Back 107

compensatory damages for specific, identifiable expenses such as medical expenses or lost wages

Front 108

general damages

Back 108

compensatory damages for losses that do not involve specific measurable expenses

Front 109

punitive damages

Back 109

punish a defendant for malicious or deceitful behavior